Last weekend, in my Market Forecast, I said,
"For the new week, although market still looks strong, it is also toppy. After 2 weeks of rallying, it is starting to look sluggish. SPX 980 is posing some resistance. We could see some profit-taking and consolidation here before testing SPX 1000. SPX 950 now should be a support. As long as the profit-taking does not take the market below SPX 950, the bullish fomations will hold. The market can certainly use a few days of rest to let off some steam. Financials still has not broken out of its recent trading range and could be one of the keys in determine whether the market can take some breathing without losing its altitude."
Things pretty much happened exactly as described above. From Monday through Wednesday, the market consolidated and traded in a tight range. Every time the market slipped, we saw buyers come in to buy the dips. While commodity sectors took some quick falls early in the week, financials and techs stayed strong, propping up the market. On Thursday, the market received better-than-expected jobs data and stocks jumped again! Nasdaq penetrated above 2000 and SPX came close to 1000! Profit-taking soon kicked in after a surge on Thursday morning. On Friday, the market again paused as investors digested the GDP data.
For the week, the Dow finished up +78.37 points; SPX added +8.22 points; and Nasdaq gained +12.54 points. Both oil and gold were weak to start, but, finished strongly. Oil actually closed higher for the week. XLF (financials ETF) closed just above the $13 level, which could make things very interesting next week. We'll take a look at these in the Sector Watch. Let's see where the market stands after Friday's close:
SPX
SPX added +0.73 points to close at 987.48. Its daily MAs and MACD went higher.
Nasdaq
Nasdaq slid 5.8 points to close at 1978.5. It daily MAs were up, but, the MACD flattened.
Since early July, the market has been pushing higher. The little breaks that it took here and there didn't really lose any altitude at all. Nasdaq went above 2000 last week, but, did not close above. SPX nearly touched 1000. Technicals are toppy, but, the market keeps looking strong. For the new week, I think there is still a lot of sidelined money looking to come in the market. There is a possibility that we see a quick pullback, just to make some room for the technicals. The dollar took a big drop on Friday, which sparked the buying in commodity sectors again. This could be an important factor for the new week. Financials stayed strong last week. If they break out, we should see SPX charge above 1000!
Sector Watch
XLF (financials)
As mentioned earlier, XLF closed just above the $13 level. The technicals on XLF are strong. Can XLF finally break above this resistance? GS tested $160 again and came back up to close at $163.3 for the week. BAC also had a good week and is looking to test the resistance at $15 soon. STT and STI have also been pushing higher.
UUP (dollar)
UUP tried hard last week to make a turn-around. But, it took a big dive on Friday. This could start a new leg down! We may see a quick bounce early in the week, but, UUP has pushed below the support at $23.5. If the dollar falls lower, we should see another wave of buying in the commodity sectors.
GLD (gold)
GLD tested the support at around $91 and $92 last week again. It then popped up to test the resistance at $94. It looks to be still range-bound. But, its daily MAs are about to start a new bullish formation. If the resistance at $94 is broken, GLD should charge higher, which bodes well for the gold plays such as GOLD, AEM, and ABX.
XME (metals and mining)
XME closed just below the resistance at $40, again! If the dollar falls lower, miners should be among the favorite plays. FCX closed above $60 last week and might be a bit toppy, on the technical side. X still looks strong and as a lot of room to go higher. Coal plays could be ready to pop.
Good night and HappyTrading! ™
